GLOBAL MARKETS-Sino-U.S. trade truce hopes rekindle risk appetite

* Europe, Asia lifts MSCI world share index after 4 down
days
* Germany leads Europe, Japan, China, Hong Kong top Asia
* U.S.-China tentative agreement to trade truce - SCMP
* Market pares bets for half-point Fed rate cut in July

By Marc Jones
LONDON, June 27 (Reuters) - Risk appetite returned to world
markets on Thursday following a media report the United States
and China have tentatively agreed to a truce ahead of a
highly-anticipated weekend meeting of the two nations' leaders
in Tokyo.
The South China Morning Post (SCMP), citing sources, said
Washington and Beijing were laying out an agreement that would
help avert the next round of tariffs on an additional $300
billion of Chinese imports. On Wednesday, U.S. President Donald Trump said a trade deal
with his Chinese counterpart Xi Jinping was possible this
weekend, though he was prepared to impose tariffs on virtually
all remaining Chinese imports if talks fail. "But the truce cake seems to have been baked," the SCMP
cited one of its sources as saying.
Hopes that the world's two biggest economies would finally
reach an agreement were enough to cheer investors, sending
MSCI's broadest index of world shares up over 0.2%
.MIWD00000PUS after four days of back-to-back losses.
Germany's trade-sensitive DAX .GDAXI led Europe's early
gains with a 0.7% jump with the other main bourses and Wall
Street futures all up between 0.2%-0.6%. .EU .N
Asia had finished strongly with China's blue-chip index
.CSI300 closing up 1% and Hong Kong's Hang Seng .HSI and
Japan's Nikkei .N225 ending 1.4% and 1.2% higher. .T .SS
"The market is focusing on the hope that there will be a
trade truce (between the U.S. and China)," said ING's chief EMEA
FX and rates strategist Petr Krpata.
"We still think though that it would be temporary and that
things will get worse again over the summer before they get
better."
The trade row has already rattled investors who have ditched
shares for the safety of bonds and gold this year. It has also
prompted the U.S. Federal Reserve to shift 180 degrees from
raising interest rates in December to now signalling a cut as
soon as next month.
Many traders were still circumspect and expected the market
to remain in a narrow range until after the weekend meeting of
G20 leaders in Osaka, Japan, where Trump is also holding
bilateral talks with other nations.
"Focus continues to be on the G20 meeting with a story in
the SCMP...lifting the entire market, although the details
suggest nothing has actually been agreed yet," JPMorgan said in
a note.
"Overall it seems more likely that tariffs are hiked than
not, following the meeting, though the timing of this may be
confused by a desire for positive optics."

LESS THAN 50
Trump weighed into U.S. monetary policy on Wednesday,
accusing Fed Chairman Jerome Powell of doing a "bad job" and
"out to prove how tough he is" by not cutting interest rates.
Markets are convinced the Fed will indeed ease at its next
meeting in July, but had to scale back bets on a half-point cut
following cautious comments from various policy makers.
Futures FEDWATCH are 100% priced for a cut of 25 basis
points next month, and imply a 22% chance of 50 basis points.
The probability of a less aggressive Fed and expectations of
a Sino-China trade truce helped ease the selling pressure on the
U.S. dollar, which rose 0.1% to 96.300 .DXY on a basket of
currencies from a three-month trough of 95.843. /FRX
The dollar bounced modestly against the yen to 108.13 JPY=
and away from a low of 106.77. The euro likewise eased back to
$1.13505 EUR= from a top of $1.1412.
The dollar's gains took a little of the shine off gold,
which broke a six-session winning stretch and eased to $1,403.94
per ounce XAU= .
Oil prices ran into profit-taking too, having gained
overnight on a larger-than-expected drawdown in crude stocks as
exports hit a record high and surprise falls in refined product
stockpiles. O/R
Brent crude LCOc1 futures eased 55 cents to $65.92, while
U.S. crude CLc1 lost 47 cents to $58.91 a barrel.

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